· Rebounding crude oil prices re-confirm firm bottom at $70/bl; prices get support from weaker US dollar, expectations of reviving economic growth in China.· Further fall in US inflation in December raises expectation of smaller US interest-rate increase in February, pause in rate-increases from start of Q2 2023.· US four-week average gasoline demand falls in early-January for 41st straight week; pace of contraction slows..· Weakening Americas lube demand, combined with firmer Chinese demand, likely to complicate arbitrage flows from Asia to Americas.· Slowdown in Latin America’s lube demand could benefit US refiners by complicating arbitrage opportunities from Asia.· Any slowdown in Mexico’s lube demand in 2023 likely to have smaller impact on US shipments to the country compared with 2022.· Economic growth in Q4 less weak than expected in European markets like Germany and UK.· Warmer-than-expected weather in Europe cuts energy costs, eases concern about winter gas shortage.· Typical base oils demand weakness in Europe at start of year generates price response that incentivizes drop in supply.· Fall in prices set to magnify impact of likely supply-demand imbalance in coming weeks.· Any such drop in supply would likely coincide with seasonal pick-up in demand in few weeks’ time and imposition of EU sanctions on Russian oil products in early February.· Steady European base oils imports from Russia in Q4 2022 suggest some buyers still need to line up alternative supplies before EU ban on Russian imports comes into effect..· Europe’s steady imports from Russia since Q2 2022, combined with rise in Russian shipments to Turkey, help to sustain steady Russian base oils exports in 2022.· Cessation of Europe imports in Q1 2023 set to add to pressure on Russian producers to line up alternative outlets or cut run rates.· Turkey’s demand for premium-grade supplies from Europe likely to hold firm even amid rising imports of premium grades from Russia.· Asia-Pacific base oils demand likely to get seasonal boost after lunar new year holidays amid festivals in southeast Asia, spring oil-change season in China, financial year-end in India.· China’s December passenger car sales fall 6pc year on year; truck sales fall 23pc, reflecting weak industrial activity.· China’s car sales show signs of falling in early January from year-earlier levels following expiry of stimulus measures. Sales hold firm vs early December.· Chinese blenders’ lack of stock-building ahead of lunar new year gives them leverage to manage possibility of slow demand in spring oil-change season.· Lack of stock-building conversely leaves Chinese blenders exposed to possibility of stronger-than-expected pick-up in base oils demand as economic recovery coincides with spring oil-change season.· Indonesia’s demand for overseas base oils supplies likely to stay strong this year amid still-firm economic growth.· Indonesia faces prospect of rising competition for those overseas supplies amid pick-up in Chinese demand.· Trend already began in late-2022.· India’s December base oils imports fall to lowest in more than two years as regional supply surplus dwindles, ahead of seasonal rise in demand in Asia-Pacific in Q1 2023..· India’s rising domestic lube consumption set to sustain firm demand for base oils.· Indian refiners’ high base oils production in 2022 unlikely to rise much more without new capacity.· Until new capacity starts up, buyers would need to tap more base oils supplies from overseas markets to cover further rise in lube demand.· India’s demand for very-light grade base oils likely to stay muted.· Rising consumption of premium-grade base oils in markets like Pakistan likely to sustain firm demand for overseas supplies, cushion against impact of slowdown in domestic lube demand..Global base oils - week of Jan 9: Supply outlook
· Rebounding crude oil prices re-confirm firm bottom at $70/bl; prices get support from weaker US dollar, expectations of reviving economic growth in China.· Further fall in US inflation in December raises expectation of smaller US interest-rate increase in February, pause in rate-increases from start of Q2 2023.· US four-week average gasoline demand falls in early-January for 41st straight week; pace of contraction slows..· Weakening Americas lube demand, combined with firmer Chinese demand, likely to complicate arbitrage flows from Asia to Americas.· Slowdown in Latin America’s lube demand could benefit US refiners by complicating arbitrage opportunities from Asia.· Any slowdown in Mexico’s lube demand in 2023 likely to have smaller impact on US shipments to the country compared with 2022.· Economic growth in Q4 less weak than expected in European markets like Germany and UK.· Warmer-than-expected weather in Europe cuts energy costs, eases concern about winter gas shortage.· Typical base oils demand weakness in Europe at start of year generates price response that incentivizes drop in supply.· Fall in prices set to magnify impact of likely supply-demand imbalance in coming weeks.· Any such drop in supply would likely coincide with seasonal pick-up in demand in few weeks’ time and imposition of EU sanctions on Russian oil products in early February.· Steady European base oils imports from Russia in Q4 2022 suggest some buyers still need to line up alternative supplies before EU ban on Russian imports comes into effect..· Europe’s steady imports from Russia since Q2 2022, combined with rise in Russian shipments to Turkey, help to sustain steady Russian base oils exports in 2022.· Cessation of Europe imports in Q1 2023 set to add to pressure on Russian producers to line up alternative outlets or cut run rates.· Turkey’s demand for premium-grade supplies from Europe likely to hold firm even amid rising imports of premium grades from Russia.· Asia-Pacific base oils demand likely to get seasonal boost after lunar new year holidays amid festivals in southeast Asia, spring oil-change season in China, financial year-end in India.· China’s December passenger car sales fall 6pc year on year; truck sales fall 23pc, reflecting weak industrial activity.· China’s car sales show signs of falling in early January from year-earlier levels following expiry of stimulus measures. Sales hold firm vs early December.· Chinese blenders’ lack of stock-building ahead of lunar new year gives them leverage to manage possibility of slow demand in spring oil-change season.· Lack of stock-building conversely leaves Chinese blenders exposed to possibility of stronger-than-expected pick-up in base oils demand as economic recovery coincides with spring oil-change season.· Indonesia’s demand for overseas base oils supplies likely to stay strong this year amid still-firm economic growth.· Indonesia faces prospect of rising competition for those overseas supplies amid pick-up in Chinese demand.· Trend already began in late-2022.· India’s December base oils imports fall to lowest in more than two years as regional supply surplus dwindles, ahead of seasonal rise in demand in Asia-Pacific in Q1 2023..· India’s rising domestic lube consumption set to sustain firm demand for base oils.· Indian refiners’ high base oils production in 2022 unlikely to rise much more without new capacity.· Until new capacity starts up, buyers would need to tap more base oils supplies from overseas markets to cover further rise in lube demand.· India’s demand for very-light grade base oils likely to stay muted.· Rising consumption of premium-grade base oils in markets like Pakistan likely to sustain firm demand for overseas supplies, cushion against impact of slowdown in domestic lube demand..Global base oils - week of Jan 9: Supply outlook
